Getting Baseball Back On Track

As Yogi might say: Déjà vu all over again. Between 1972 and 1994, every time Major League Baseball negotiated a new collective bargaining agreement there was a work stoppage. The worst one, of course, was 1994-95 when the season was interrupted and there was no World Series for the first time since 1904. Then someone developed a labor war vaccine and, all of a sudden, baseball found enduring labor peace … until 2020, that is.

Many baseball fans are rolling their eyes, gritting their teeth and crossing their fingers. I’m a veteran of the 1994-95 season when I consulted for the Players Association. The lines of battle back then were painted clearly and self-righteously by both sides. At the end of it all, I suppose one could argue that, thanks to then district court judge Sonia Sotomayor, the players came out on top. But the game itself suffered, attendance dropped precipitously. Thankfully for baseball, Cal Ripken was in the midst of breaking Lou Gehrig’s consecutive game streak, and Sammy Sosa and Mark McGwire were preparing to assault the Ruth/Maris home run record. Baseball was rescued, but it won’t be so easy this time around, not with Covid-19, widespread economic malaise, flagging youth interest in the sport, and an expanding plethora of video entertainment sources at our finger tips.

It is easy to say “a pox on both your houses.” But there are some real issues and almost as many misconceptions. Let’s do some fact checking.

Players’ Claim 1: While the March Agreement stipulated players would be paid in 2020 pro rata based on the proportion of the season they ultimately played (e.g., if teams played 81 of the normal 162 games they would get half their contracted salary), the deal also stipulated that there could be no further adjustment in player salaries. False. In fact, the March Agreement explicitly anticipates the possibility of further adjustment in player salaries due to the possibility of Covid-reduced ballpark attendance. Such an adjustment makes perfect economic sense since the average team gets approximately half of its revenue from stadium sources.

Players’ Claim 2: When the owners proposed that the players would get paid a guaranteed 50% of league-wide revenue, the union said that this constituted a salary cap and foretold the advent of a permanent salary cap system. False. Salary caps stipulate a team maximum and a team minimum payroll, as well as maximum contract length and, often, a maximum individual salary. MLB’s proposal did none of that. It simply adjusted overall league-wide payrolls according to the very uncertain level of league-wide revenue. This, after all, is what happens in a competitive marketplace where employers pay employees the estimated value of what they produce (marginal revenue product). Further, there was never any suggestion that the proposed system would prevail after the unique circumstances of 2020.

Players’ Claim 3: Team owners are billionaires and, even if they are losing tens of millions of dollars in 2020, they can afford to pay the players more. While this assertion might be factually accurate for most owners, it is reasonable to ask, why team owners should subsidize player salaries rather than, say, the wages of McDonalds’ workers or the revenue of city and state governments during their profound, Covid-provoked fiscal crisis. Business owners throughout the U.S. economy rightfully can expect to turn a profit on their investments, regardless of how much wealth they own.

To be sure, the owners’ behavior is not beyond reproach either.

First, they should have offered to share the relevant portions of their financial books with the Players Association as part of their deal to split revenue. 

Next, the owners’ second proposal was stilted to pay the 65% of players with salaries at or below $1 million at least 85.8% of their pro-rated salary, while the 2.9% of players with salaries at or above $20 million would get only 50.9% of their pro-rated salary. While this sliding scale made sense because it favored those clubs that would lose most if there were no fans in the stands, it also provided a basis to divide and conquer the players’ union. 

Lastly, the owners’ third proposal, that would have reduced the season to 50 games, makes little baseball sense and would have cut player pay by 69%. It was little more than a scare tactic.

Divide and conquer strategies are not new to collective bargaining, and neither is sharp rhetoric. Both sides have to know that it is in their interests to find a middle ground and that the whole sport will prosper most if the owners and players begin to behave like partners, rather than warring parties. As Bob Costas told Tyler Kepner last week: “there have to be ways for them to see their mutual interest and not self-destruct.”